UPDATE 2-Verizon quarterly revenue misses estimate, shares down
July 18 (Reuters) - Verizon Communications Inc said strength in its wireless business was tempered by weakness in its traditional wireline unit, producing weaker-than-expected revenue growth for the quarter and sending its shares down 1 percent.
The company said it was seeing cost-cutting from corporate and government customers, partly offsetting better-than- expected wireless customer growth. Also, its wireless profit margins were hurt by higher costs.
Verizon stock was off 1 percent to $50.20 in premarket trade on Thursday.
"It wasn't a blow-the-doors-down quarter, but it was a solid quarter," said Evercore analyst Jonathan Schildkraut, who was impressed with Verizon's customer growth. "It's an expensive stock and they need to do a lot to support that."
Verizon Wireless, its venture with Vodafone Group Plc , added 941,000 subscribers in the quarter, compared with the average expectation for 836,500 from six analysts contacted by Reuters. Estimates ranged from 700,000 to 909,000.
It also forecast that net subscriber additions would increase sequentially in the remaining two quarters of 2013.
Excluding a pension-related gain, Verizon said it earned 73 cents per share, compared with expectations for 72 cents, according to Thomson Reuters I/B/E/S.
But while operating revenue rose 4.3 percent at $29.8 billion from $28.55 billion, it was shy of estimates of $29.83 billion.
Profit margin came to 49.8 percent, based on earnings before interest, taxes, depreciation and amortization, which was below five analyst estimates between 50 percent and 50.9 percent.
Schildkraut noted that higher-than-expected wireless customer departures, known in the industry as churn, would have increased the company's costs. Verizon reported churn of 0.93 percent, compared with his expectations for 0.9 percent.
Analysts expected Verizon, the first of the U.S. telecommunications companies to report second-quarter results, to take the lion's share of wireless customer growth in the quarter.
But they expect competition to get tougher as the year progresses because Sprint Corp, which was recently bought by Japan's SoftBank Corp, may be able to compete with the help of SoftBank's investments. Also, smaller rival T-Mobile US Inc has been pushing aggressively to win new subscribers.
Verizon said it increased its capital spending budget to between $16.4 billion and $16.6 billion for the full year, compared with its previous target of $16.2 billion.
The company said it will need to spend more as it anticipates higher demand for wireless data services, and will have to start using a new chunk of wireless airwaves.
Verizon added 161,000 net new FiOS Internet customers and 140,000 net new FiOS video connections in the quarter.
Verizon's earnings rose to $2.25 billion, or 78 cents per share, from $1.83 billion, or 64 cents, in the year-ago quarter.
AT&T Inc, the No. 2 U.S. mobile provider, is scheduled to report earnings on July 23, and Sprint is due to report on July 30.